How to Address Complexity in Project Risk Management

How to Address Complexity in Project Risk Management

Projects have always been a complex endeavor and have always to deal with the unpredictable, the surprising, and the unexpected. This was 200 years ago so, and it is still so. However, the complexity is increasing every year, especially when IT technologies are involved. In this environment, it’s harder to predict what will happen because complex systems interact in unexpected ways. It’s harder to make sense of things because the degree of complexity may lie beyond our cognitive limits. And it’s harder to place bets, because the past behavior of a complex system may not predict its future behavior. The PMBOK® Guide Seventh Edition includes now the topic complexity and how it is related to Risk Management. I wanted to deepen my knowledge and could not withstand to write this article. Read on to deepen your knowledge too!

Complicated Versus Complex

It’s easy to confuse the merely complicated with the genuinely complex. It’s important that you know the difference.: If you manage a complex organization or project as if it were just a complicated one, you’ll make serious, expensive mistakes.

Let’s start with simple systems. These contain few interactions and are very predictable. Think of switching a light on and off: The same action produces the same result every time.

Complicated systems have many moving parts, but they operate in patterned ways. The electrical grid that powers the light is complicated: There are many possible interactions within it, but they usually follow a pattern. It’s possible to make accurate predictions about how a complicated system will behave. Here another example: Flying a commercial airplane involves complicated but predictable steps, and as a result it’s surprisingly safe.

Complex Systems, by contrast, are imbued with features or elements that may operate in patterned ways but whose interactions are continually changing. Three properties determine the complexity of an environment. Read on and discover them.

The Three Properties that Determine the Complexity

The three properties of a complexity system:

  1. Multiplicity refers to the number of potentially interacting elements.
  2. Interdependence relates to how connected those elements are.
  3. Diversity has to do with the degree of their heterogeneity.

The greater the multiplicity, interdependence, and diversity, the greater the complexity. Complexity is always a characteristic of a project, because it contains a large number of interactive, interdependent and diverse elements. Complexity within a project may be amplified with a greater number of interfaces to specific systems or a diversity of stakeholders, such as regulatory agencies, international financial institutions, multiple vendors, numerous specialty subcontractors, or local communities.This is obviously difficult to manage and they may act in an unpredictable way.

It is very difficult, if not impossible, for an individual decision maker to see through an entire complex system. This is essentially a vantage point problem: It’s hard to observe and comprehend a highly diverse array of relationships from any one location. In a complex environment, even small decisions can have surprising effects.

The Sources of Complexity

According to the PMBOK® Guide some of the more common sources of complexity in projects are:

  • Human behavior is the interplay of conduct, attitudes, and experience of people. Human behavior can also contribute to complexity by introducing elements of subjectivity, such as personal agendas, that conflict with the project’s goals and objectives. Stakeholders located in remote locations may have different time zones, speak different languages, and have different cultural norms.
  • System behavior is the result of dynamic interdependencies within and among project elements. For example, the integration of different technology systems or the interactions among components of the project system may lead to interconnected risk.
  • Uncertainty and Ambiguity. Ambiguity is a state of being unclear, of not knowing what to expect or how to comprehend a situation because of a lack of knowledge.
    Uncertainty is the lack of understanding and awareness of potential issues, events, paths to follow, or solutions to pursue. Uncertainty can be differentiated in reducible and irreducible uncertainty. The PMBOK® Guide mentions specifically “Ambiguity” which is epistemic uncertainty. This is uncertainty because of a lack of knowledge. Read more about the different uncertainties in this article: How to Successfully Manage Reducible and Irreducible Risk.
  • Technological innovation can cause disruption to products, services, ways of working, processes, tools, techniques, procedures, and more. New technology, along with the uncertainty of how that technology will be used, contributes to complexity. Innovation has the potential to help move projects toward a solution, or to disrupt the project when associated uncertainties are not defined, leading to increased complexity.

Complexity creates uncertainty, and uncertainty creates risks. These risks may impact the project in any area and at any point in the project life cycle.

How to Approach Complexity and Mitigate Related Risks?

In a complex environment, even small decisions can have surprising unintended consequences. If it’s impossible to predict the future in a complex system with a high degree of accuracy, e.g. customer behavior, and if projects or organizations must nonetheless place bets with the future in mind, what’s the wisest course? Minimizing risk is crucial for anyone in charge of a complex system, and traditional approaches aren’t good enough. Managers and project teams must learn to:

Identify elements of complexity: Project teams have to identify elements of complexity throughout the project by continually looking at the project components as well as the project as a whole for signs of complexity.

Address complexity: To address complexity, project teams can acquire more knowledge to better understand the complexity and, e.g., modify their activities to address the uncertainty as a result of complexity or simplify elements of a project to reduce the complexity.

Limit predictions: Limit or even eliminate the need for accurate predictions, e.g. how markets may react to a new product. Test markets in product development, e.g. with a Minimum Viable Product (MVP) or include your customer in the product development process to get direct feedback and learn from this.

Deepen your knowledge: Knowledge of systems thinking, complex adaptive systems, experience from past project work (lessons learned), experimentation, and continuous learning related to system interaction leads to the project team’s increased ability to navigate complexity or when it emerges.

Use decoupling and redundancy: Sometimes elements of a complex system can be separated from one another to decrease the systemic consequences if something goes wrong. Decoupling yields two benefits: It shields parts of the project or organization from the risks of an unexpected event, and it preserves parts that may be needed to mount a response.

Use Creativity Methods: Brainstorm with your team what adverse events or opportunities could happen. Also, make sure that people view unlikely but potentially catastrophic future events as real. Sharing anecdotes about near misses and rehearsing responses to a hypothesized negative event can help focus attention on a possibly significant future occurrence. You can also imagine different scenarios of what the complexity might cause, e.g., with posing counterfactuals when asking: “What if?”

Complexity is the enemy of clarity

Andy Stanley

From my experience, project teams often underestimate or cannot foresee the complexity of their endeavor because the complexity, which is the result of a variety of uncertainties, lack of knowledge, many interactions, dependencies, events, or relationships. The results of this complexity are risks, and when they occur lead often to massive budget overruns and missed deadlines. I suggest you address the topic complexity in your risk management activities with your team and discuss how to deal with it!

Deepen you knowledge with these articles:

What is the Difference Between Uncertainty and Risk?

How to Successfully Manage Reducible and Irreducible Risk

How to Reduce Risks in Product Development

Here You Can Find Even More Knowledge

Would you like to learn more about how to make your projects more successful with Project Risk Management? My book “Project Risk Management – Practical Guide” takes you an important step further!

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Sources for this article:

PMBOK® Guide Seventh Edition
Learning to Live with Complexity, Harvard Business Review, 2011

Posted in Risk Management.